Does Your Credit Card Really Cover Your Rental Car?

30 Sep 2015 | Author: | No comments yet »

Card’s chip on their shoulders.

For the black magnetic stripes on the backs of your credit and debit cards, Thursday will mark the beginning of the end — a shift that could be costly for retailers. Though the credit card industry’s self-imposed deadline is Thursday, more than six in 10 American card holders still don’t have chip-enabled credit cards in their wallets, and retailers are nowhere near ready, according to a new survey.Only a fraction of U.S. payment card issuers have sent chip-embedded cards to customers, and only a fraction of merchants have installed chip-enabled payment systems as a deadline looms tomorrow to shift liability for fraudulent transactions from credit card companies.Thursday marks the deadline for US merchants and financial institutions to start making the transition to the new payment system, but most aren’t prepared for the switch to chips from magnetic stripes.

The little piece of plastic can quickly cause of lot of heartache — the most obvious sign is when you do not pay your balance off in full every month. Starting Thursday, merchants will be held fully liable for any losses due to credit card fraud if they are not geared up for the new, more secure, chip cards. The EMV Migration Forum — EMV stands for Europay, MasterCard and Visa, the three companies that created the chip card standard — estimates 200 million-plus chip-enabled cards have been issued out of 1.2 billion cards in the marketplace. “There’s still a lot more cards to be updated to the chip technology for sure,” said Randy Vanderhoof, director of the forum, a multi-industry group. Analysts expect confusion and delays at checkout counters that could last into the holiday shopping season as customers look to dip, instead of swipe, and merchants contend with new machines to read the updated cards. And consumers will need to change their habit of swiping their credit cards to pay: Instead, they “dip” their new cards into terminals and leave them there until the transaction is complete.

Figures from financial comparison website Finder.com.au show the average credit card rate is 17 per cent but shop around and you can get rates as low as 8 per cent. “If you don’t use your card often, you pay off your balance in full each month and you spend less than $14,000 per year on your card then you shouldn’t need to pay an annual fee.” Cash advance rates range anywhere from about 19 to 30 per cent and you’ll most likely get hit with a cash advance withdrawal fee of about $3 or up to five per cent of the amount withdrawn — whichever is greater. “If you’re finding it hard to manage your finances, you may be able to put a temporary hold on your credit card account or you could close your account,’’ she says. If retailers who don’t follow new procedures for credit card security, including the use of new cards that include embedded computer chips, then they will have to pay for what thieves steal. “It’s another thing we have to deal with,” says Bob Gereke, who owns the pottery studio Mud, Sweat, and Tears in New York City. “There’s so many, and this one can be important.” The new cards, each of which has a unique microchip inside that makes it difficult to forge, already are in widespread use in Europe.

But as of tomorrow, if a chip-enabled card is used for an unauthorized in-store transaction, the merchant will bear the liability if it was unable to process it as a chip card transaction. Consumer group One Big Switch, with News Corp Australia, has launched the Big Debt Switch to help unlock a number of deals that could lower the cost of debt for many households. Beginning Oct. 1, retailers that don’t have systems capable of reading the new chip-enabled cards will be stuck with the liability for some fraudulent transactions.

Many customers of some of the largest banks in Massachusetts, including Citizens Financial Group, Eastern Bank, and Rockland Trust, don’t have the cards yet and may not get them until next year. “I would have expected to see more done,” said Michael Grillo, director of marketing for ACI Worldwide Inc., a Florida payments technology company with offices in Waltham. “There’s a lot of unreadiness. Although they’re not required to upgrade to the latest card readers — chip-enabled cards still have a readable magnetic stripe — many retailers are making the investment that can cost $49 for the Square reader or several hundred dollars for alternatives. “We’re lucky that we haven’t had any fraud yet, but that possibility is always in the back of our mind,” Tolch said. “Having the new credit card reader will add that extra level of security that any business can use.” Unlike traditional magnetic strips, the chips on newly issued debit and credit cards feature a security code unique to each transaction that makes the card less susceptible to fraud, Carolyn Balfany, MasterCard’s senior vice president of product delivery, recently told the Post-Dispatch. Most small businesses remain unaware of that risk, says Holly Wade, director of research and policy analysis at the National Federation of Independent Business. “It’s frightening for small business owners thinking that they might be hit with higher costs, more liability in their business, and not knowing what they need to do to comply,” Wade says. The details transmitted during the swipe of a traditional magnetic stripe card, such as the account number and expiration date, don’t change, so a thief using a skimmer on a payment machine can grab and then resell the information.

Holly Cunningham, president and founder of Hollyberry Baking Co., spent time on the phone with her bank Tuesday to prepare for Thursday when she’s adding new equipment to accept chip cards at her catering business that includes a cafe on Manchester Road in Warson Woods. In addition, urban and suburban card holders are also more likely to have gotten updated cards than rural residents. “It’s a big, long process,” said Matt Schulz, senior analyst at CreditCards.com. “This is the biggest challenge in decades in how credit cards are used in America.” If you are among the 60% who haven’t got a new card, Schulz said there are two things you can do: Call your bank and ask when it’s coming, or apply for a new card. Her business hasn’t had any fraudulent transactions, but credit cards she uses for the business have been compromised four times in the past two months. Prepaid cards also are moving toward chip technology, but at a much slower rate because of a wider variety of offerings, lower value limits and less risk for merchants and card issuers, said Brian Riley, an executive at research firm CEB TowerGroup. The standard magnetic stripe cards will probably remain in circulation for years, said Seth Ruden, senior fraud consultant for the Americas at ACI Worldwide, a payment systems company.

Full compliance on the merchant side won’t happen until 2017 when automated fuel dispensers are also required to have payment terminals that read the chip cards. US card issuers are primarily using a chip and signature system, in which the card is dipped into the reader, but the customer signs to authorize the charges. Retail trade associations worry that the burden of introducing the technology is falling disproportionately on stores, restaurants, and other businesses, but the chip-and-signature system is not as secure as chip-and-PIN. “They’ve locked the front door, but left the back door opened,” said Mallory Duncan, general counsel of the National Retail Federation in Washington, D.C., who called the approach “half-baked” in a conference call on Tuesday. Banks and card companies said the chip-and-signature cards should address a vast majority of fraud attempts, and they didn’t want to confuse consumers who are used to signing.

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